Koch Brothers

Koch Brothers refers to Charles G. Koch and his brother David H. Koch, the billionaire co-owners of Koch Industries, one of the largest privately-held companies in the world.[1] The New Yorker has described David Koch and his brother Charles Koch as "longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation."[2] The Kochs have built and bankrolled a powerful network of foundations, think tanks, and politically active organizations that try to influence elections and policy.

In the 2012 election cycle, the Kochs and fellow donors backed a "network of politically active nonprofit groups" that was "carefully constructed with extensive legal barriers to shield its donors," raising over $400 million for the election cycle, according to the Washington Post. As the Post explains, a "labyrinth of tax-exempt groups and limited-liability companies help[ed] mask the sources of the money, much of which went to voter mobilization and television ads attacking President Obama and congressional Democrats."[3]

This high level of spending is likely to continue in the 2014 election cycle. The Kochs' Americans for Prosperity reportedly plans to spend $125 million in the 2014 elections, an amount "unprecedented for a private political group in a midterm," according to Politico.[4]

Together the Koch brothers were worth an estimated $94.2 billion as of January 2016.[5]

Koch Brothers Early History

Charles Koch (b. 1935) and David Koch (b. 1940) are two of the four children of Fred Koch and Mary Koch. Fred Koch founded Wood River Oil and Refining Co. in 1940; it had been renamed Rock Island Oil & Refining Co. by 1961 and was renamed Koch Industries by Charles Koch in 1967.[6] Fred Koch was also a founder and executive committee member of the far-right John Birch Society, known for opposing the Civil Rights Act, the Voting Rights Act and communism.[7]

The senior Koch's views are thought to have influenced the Koch brothers' pro-business, anti-union agenda. Lisa Graves noted that "The Kochs' mistrust of public education can be traced to their father, Fred, who declared that the National Education Association was a communist group and public-school books were filled with “communist propaganda,” paranoia that extended to all unions, President Eisenhower and the “pro-communist” Supreme Court."[8] Echoing this anti-union fervor, David Koch has stated that Wisconsin Governor Scott Walker's attack on public unions was “critically important."[9]

He also accused President Barack Obama of being "a hardcore socialist."[10]

Relationship to John Birch Society

Fred Koch was a founding member of the John Birch Society. In the 1960s, Charles Koch opened a John Birch Society bookstore with Bob Love, a friend of his father.[11] At the time, the Society was campaigning against the civil rights movement, calling for the impeachment of Chief Justice Earl Warren, who had ordered public school desegregation in Brown v. Board of Education, and accusing President John F. Kennedy of "treason" in ads shortly before his assassination. [7]

Charles and Love didn't resign from the Society until 1968. The split was reportedly due to disagreement's about the Society's support for the Vietnam War.[7]

Charles shared his isolationist position with Robert LeFevre's all-white "Freedom School," which he funded and on whose board he sat. Charles had also encouraged his brother, David, to attend a Freedom School retreat, according to Sons of Wichita.[11]

The Koch Fortune

Charles Koch took over his father's Rock Island Oil and Refinery Company, becoming president and chairman in 1967 and renaming it Koch Industries [7] Since then, the company's revenues grew from just over $100 million to over $115 billion in 2014. The Koch brothers' fortunes have also grown dramatically in that time, increasing from $375 million each in 1984 to some $17 billion each in 2008--and a staggering $41 billion each in 2014, just a few years after the 2008 economic crisis.

In addition to successful investments and expansion of its resource extraction operations over the years, Koch Industries has engaged in commodity speculation and created new types of derivatives.[12]The Nation has reported that Koch Industries was "among the largest traders (including Goldman Sachs and Morgan Stanley) speculating on the price of oil in the summer of 2008,"[13] afterwards also playing a prominent role in lobbying against regulation of the derivatives market, according to Bloomberg Businessweek.[14]

Koch Industries has been involved in many investigations and indictments related to the Clean Air Act and the Clean Water Act.A list of lawsuits involving Koch Industries can be accessed here: Legal Complaints Against Koch Industries

Koch Brothers Early Activism, 1960-1980

David Koch Runs for Vice President as Libertarian, 1980

David Koch was the vice-presidential nominee for the Libertarian Party in 1980, running alongside presidential candidate Ed Clark. About the failed bid, the New York Times has written that "much of what occurred in that quixotic campaign shaped what the Kochs have become today — a formidable political and ideological force determined to remake American politics, driven by opposition to government power and hostility to restrictions on money in campaigns."[15]

David Koch's campaign was made possible by Buckley v. Valeo, a 1976 Supreme Court decision that loosened campaign finance laws. The decision permitted unlimited spending of a candidate's own money on his/her own campaign, as well as unlimited spending by individuals to promote a candidate, if that individual was not coordinating their campaign with the candidate.[15] In 1979, David Koch wrote a letter to Libertarian Party members about his plan to make use this new loophole to fund a Libertarian Party campaign. “As the Vice­ presidential nominee of the Libertarian Party I will contribute several hundred thousand dollars to the Presidential campaign committee in order to ensure that our ideas and our Presidential nominee receive as much media exposure as possible.”[15] David would spend about $2.1 million on the campaign, but the Libertarian Party won just over 1% of the vote nationally.[15]

According to William Koch, Charles and David's brother, Charles began spending significantly on the Libertarian Party. According to the New York Times, William said in a 1986 interview, "Charles was giving as much to the Libertarians as he was paying out in dividends […] Pretty soon we would get the reputation that the company and the Kochs were crazy.”[15]

Statements David Koch made during the campaign are revealing of his anti-government views. As the New York Times reported about his statement at the 1979 Libertarian nominating convention, David "denounced the 'harassment of Koch Industries and implored the Libertarian Party activists to make the party 'a force that will roll back the coercive force of government.'"[15] At a speech on the campaign trail in 1980, "David Koch railed against what he saw as overregulation. Presidents Nixon and Carter had bequeathed an 'Alice in Wonderland' energy policy, he argued, a mix of subsidies and price controls that had stymied market forces and caused high prices and shortages."[15]

"The important strategic consideration to keep in mind is that any program adopted should be highly leveraged so that we reach those whose influence on others produces a multiplier effect. That is why education programs are superior to political action, and support of talented free-market scholars is preferable to mass advertising. The development of a well financed cadre of sound proponents of the free enterprise philosophy is the most critical need facing us at the moment."[15]

Building the Koch Cadre, Non-Electoral Activity

After the failed 1980 campaign for the vice presidency, the Koch brothers lessened their involvement in the Libertarian Party, increasingly focusing their attention and financial support on developing their own network of "educational programs" and "cadre" of free-market advocates.[15]

The Kochs' funding founded Citizens for a Sound Economy (CSE) in 1984, headed by Richard Fink. Fink was shortly thereafter appointed to President Ronald Reagan's "Commission on Privatization."[16] In the late 1980s and 1990s, CSE pushed for banking deregulation, like the elimination of Glass Steagall,[8] spearheaded the defeat of a greenhouse gas tax,[2] and helped in the defeat of health care reform in the Clinton era.[17][18]

In 2003, a rift between CSE and its related foundation led the Kochs to found Americans for Prosperity.[2] David Koch chairs the board of directors for the Americans for Prosperity Foundation.[19]

Today the brothers directly and indirectly fund a wide network of organizations that promote their "free enterprise philosophy," from think tanks to scholarship programs to policy advocacy groups. Recipients include a long list of academic institutions; Koch family foundations gave some $30.5 million to 221 colleges and universities from 2007 to 2012.[15]

Charles Lewis, the founder of the Center for Public Integrity, a nonpartisan watchdog group, said, “The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”[2]

Bankrolling American Legislative Exchange Council (ALEC)

Koch Industries has had a seat and a vote on the corporate board of the American Legislative Exchange Council (ALEC) since 1994. ALEC has awarded both Koch brothers its Adam Smith Free Enterprise Award.[8]The Nation reports that the Kochs have likely given over $1 million to ALEC over the years, and many of ALEC's model bills reflect the policies the Kochs have been advocating for decades.[8]

Funding Judicial Junkets

The Kochs have funded seminars for judges since the 1990s, first at the University of Kansas and later at George Mason University, which hosts the Koch-funded think tank the Mercatus Center. For example, the George Mason University Law & Economics Center hosted "an expenses-paid conference on public pension reform" which was funded by the Charles G. Koch Foundation, as well as corporate funders like ExxonMobil, Google, and Walmart, according to the Center for Public Integrity.[20] The Judicial Conference of the United States has noted that judges' attendance at such seminars "poses certain concerns," including that "judges may be influenced inappropriately by those who sponsor or contribute (financially or otherwise) to these seminar programs and who might be litigants before those judges."[21]

A report by Center for Media and Democracy/The Progressive found that a federal judge who halted an investigation into alleged illegal campaign coordination, which involved groups like the Wisconsin Club for Growth and Americans for Prosperity, "attended privately-funded, all-expenses-paid judicial seminars put on by George Mason University in 2006, 2008, 2010 and 2012."[22] The Washington Post reported on a similar conference in 2011, when Google was facing an antitrust investigation, writing that "Google executives worked behind the scenes with officials at George Mason University’s Law & Economics Center to put on academic conferences that would be attended by officials who were considering the case."[23]

Bankrolling the Tea Party

The Koch brothers and their network have played a significant role in supporting the far-right Tea Party movement. According to the New Yorker, the Kochs' "Americans for Prosperity has worked closely with the Tea Party since the movement’s inception," providing everything from "Tea Party talking points" to lists of officials for activists to contact to funding conferences.[2] The New York Times reported that Freedom Partners, for which "longtime Koch employees" constitute a majority of the board, has given grants to a number of Tea Party-affiliated groups.[24]

According to the New Yorker, a Koch Industries spokesperson has denied that the Kochs provide funding for Tea Party groups, and David Koch has told New York magazine, "No one representing the tea party has ever even approached me."[2]

Electoral Activity

"Triad" Campaign Finance Scheme Avoids Disclosure Laws, 1996

The Koch’s have a long history of funding money into electoral campaigns. For example, the Kochs used a variety of means to influence the 1996 election cycle.

In Kansas, according to the Lawrence Journal-World,

"Koch-linked contributions of ‘hard money’—gifts of more than $200 by identifiable individuals or political action committees divulged to the FEC—to the state's four representatives and two Senators totaled $130,600."[25]

Senate Democrats found evidence of more complex funding schemes, as well, namely a political campaign operation called "Triad," which they suggested "allowed wealthy individuals to put more money into the election process than they would otherwise legally have been allowed to do" while evading campaign reporting requirements.[7] In 1997, investigators for the Senate Governmental Affairs Committee told the New York Times that "they believe[d] Koch Industries support[ed] the Economic Education Trust, based in Twin Falls, Idaho, which gave $1.3 million to Triad in 1996."[26]

In an interview with Bill Moyers, staffer Beth Stein explained the scheme as follows:

"One of the things that Triad did was set up two shell corporations, essentially, tax-exempt organizations. One was called Citizens for Reform and the other was called Citizens for the Republic Education Fund, and the sole thing that those corporations did was to air attack advertising in various races across the country."[27]

In 1998, the Minneapolis Star Tribute reported that “Koch Industries Inc. backed a secret trust that donated $1.8 million in 1996 to finance issue ads sympathetic to conservative Congressional candidates, [lending] new credence to the conclusion last year of Senate Democratic investigators that Koch's owners, Charles and David Koch, were probably the financiers behind the trust that contributed to at least two nonprofit groups.”[28]

Read the documents from the 1997 Senate Judiciary Committee investigation of "Illegal or Improper Activities in Connection With 1996 Federal Election Campaigns;" Triad is primarily discussed in Volumes 3-5.

The Koch Donor Network

Since at least 2006, the Kochs have hosted semi-annual meetings for wealthy right-wing donors.[29] While these Koch network gatherings are carefully guarded, occasional leaked documents and recordings have revealed that they include "titans of industry — from health insurance companies, oil executives, Wall Street investors, and real estate tycoons — working together with conservative journalists and Republican operatives," as well as prominent public officials, including members of Congress, state governors, and even Supreme Court Justices Clarence Thomas and Antonin Scalia.[30] The meetings involve fundraising, reportedly in the millions of dollars, as well as discussions about political strategy.[31]

A full list of known participants in Koch summit meetings can be accessed on theKoch networkpage.

Building a Post-Citizens United $400 Million Dark Money Web

The $400 million Koch network uses a maze of nonprofit groups and LLCs to conceal donations and campaign activity Source: Robert Maguire with the Center for Responsive Politics. Matea Gold and Cristina Rivero/The Washington Post.

The Koch network was one of the biggest political operations in 2012 and worked largely outside the campaign finance system, raising at least $407 million. Source: Robert Maguire with the Center for Responsive Politics.

According to the Washington Post, in 2012 the Kochs and fellow donors backed a "network of politically active nonprofit groups" that was "carefully constructed with extensive legal barriers to shield its donors," raising over $400 million for the election cycle. As the Post explains, a "labyrinth of tax-exempt groups and limited-liability companies help[ed] mask the sources of the money, much of which went to voter mobilization and television ads attacking President Obama and congressional Democrats."[3]

For example, Freedom Partners, which Politico has referred to as "the Koch brothers' secret bank", spent some $250 million in the 2012 election cycle, much of it spent in grants to other groups that ran so-called "issue ads" during the election.[32]

Involvement in Scott Walker Race and Recall Election in 2010

Walker's gubernatorial campaign received $43,000 from the Koch Industries PAC during the 2010 election. The Koch PAC gave $1 million to the Republican Governors Association, which in turn spent $65,000 on independent expenditures to support Walker.[36] The RGA also spent $3.4 million on TV ads and mailers attacking Walker's opponent, Milwaukee Mayor Tom Barrett. [37]

In a February 2012 interview with the Palm Beach Post, David Koch admitted that he was helping fund Wisconsin Gov. Scott Walker as Walker fought off a recall election sparked by his anti-union legislation.[38] The paper reported that Koch acknowledged his group, Americans for Prosperity, was "hard at work in places such as Wisconsin, where Gov. Scott Walker is facing off with public unions and grappling with a likely recall."[38]

Koch was quoted as saying, "We're helping him, as we should. We've gotten pretty good at this over the years [...] We've spent a lot of money in Wisconsin. We're going to spend more." [38]

Highlighting the recall as a fight against unions, Koch also stated that "What Scott Walker is doing with the public unions in Wisconsin is critically important. He's an impressive guy and he's very courageous…If the unions win the recall, there will be no stopping union power."[38]

2012 Election Cycle

In the 2012 Election cycle, which President Obama was up for reelection and the democrat's majority in the Senate was challenged, the Koch brothers spent almost $400 million to advance their interests.[39]

According to Politico, after this network "spent hundreds of millions to win the White House and the Senate — and came up empty," the Kochs undertook a major audit of their organizations. Reportedly disappointed with the election results, Charles Koch wrote an e-mail to major donors about the need "to re-examine our vision and the strategies and capabilities required for success," adding that "Our goal of advancing a free and prosperous America is even more difficult than we envisioned, but it is essential that we continue, rather than abandon, this struggle."[40]

Future Commitment to Politics

In a 2014 interview with the Wichita Business Journal, Charles Koch identified "cronyism" as one of the biggest problems facing the United States, adding, "You name it, in every industry we have this. The successful companies try to keep the new entrants down. Now that’s great for a company like ours. We make more money that way because we have less competition and less innovation. But for the country as a whole, it’s horrible."[41]

When asked why he continues to be involved in politics, despite negative public reactions, Charles answered, "It’s like Lee Trevino used to say, somebody asked him, "How are you winning all these golf tournaments?" and he said, “Well somebody has got to win them and it might as well be me.” That’s the way I am on this. There doesn’t seem to be any other large company trying to do this so it might as well be us. Somebody has got to work to save the country and preserve a system of opportunity."[41]

2014 Election Cycle

Through their Americans for Prosperity group, the Koch brothers ran more than 34,000 television ads in the 2014 election cycle.[42] They also operated a network of workers on the ground in 35 states to mobilize voters to advance their political agenda.[42]

2016 Election Cycle

The Koch brothers have set a spending goal of $889 million for the 2016 election cycle.[39] David Axelrod, a former senior adviser to President Obama told the New York Times, “That’s exponentially more money than any party organization will spend. In many ways, they have superseded the party.”[39]

Koch-Funded Group Attacks Kasich in New Hampshire

"Who is He?"

The Koch-tied American Future Fund took out TV ads in New Hampshire against 2016 Republican Presidential Nominee John Kasich prior to the primary held on February 9, 2015.[44] In the ad, the group attacks Kasich's record for not being conservative enough, "John Kasich — not a conservative. Not even a moderate. An Obama Republican."[44] Nick Ryan, the current president of American Future Fund told The New York Times in an email that the group was running the ads because Kasich was "misleading New Hampshire voters" and that the “The real John Kasich record looks like something you might expect from a liberal politician like Barack Obama."[45]

Kasich finished second in the New Hampshire primary to Donald Trump.[46]

American Future Fund, a Koch-funded entity located in Iowa, has taken out $1.5 million in ads against Cruz in South Carolina following the group's campaign ads against him in Iowa.[47] The TV ad criticizes Cruz for being "weak" on national security and for supporting a legal status for undocumented migrants in the US.[48] The narrator in the ad states that, “Cruz proposed mass legalization of illegal immigrants. He even praised the traitor Edward Snowden. Ted Cruz’s talk is cheap. His national security record is weak."[48]